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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
      ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
  For
    the Fiscal Year Ended December 31, 2009
    Commission File Number 1-15799
      LADENBURG THALMANN FINANCIAL
    SERVICES INC.
 (Exact Name Of Registrant As Specified In Its Charter)
  Florida

65-0701248(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number)   4400 Biscayne Boulevard, 12th Floor
    Miami, Florida

33137(Address of principal executive
    offices)

(Zip
    Code)   (212) 409-2000
       Securities registered pursuant to Section 12(b) of the
    Act:
  Title of each class

Name of each exchange on which registeredCommon stock, par value $.0001 per share

NYSE Amex   Securities registered pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Regulation S-T o o
  12b-2
  Large
    accelerated
    filer  o
    Accelerated
    filer  o
    Non-accelerated
    filer  o
    Smaller
    reporting
    company  þ 
  Rule 12b-2 o þ
      Documents
    Incorporated by Reference:
  Form 10-K




---



##### 





LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  Form 10-K
  TABLE
    OF CONTENTS
   
 PagePART IItem 1.


Business


1Item 1A.


Risk Factors


13Item 1B.


Unresolved Staff Comments


23Item 2.


Properties


23Item 3.


Legal Proceedings


23Item 4.


Removed and Reserved


23PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


24Item 6.


Selected Financial Data


24Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


25Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


35Item 8.


Financial Statements and Supplementary Data


36Item 9.


Changes In and Disagreements with Accountants on
    Accounting and Financial Disclosure


36Item 9A(T).


Controls and Procedures


36Item 9B.


Other Information


37PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


37Item 11.


Executive Compensation


37Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


37Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


37Item 14.


Principal Accountant Fees and Services


37PART IVItem 15.


Exhibits and Financial Statement Schedules


37SIGNATURES


41EX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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PART I  ITEM 1.
    BUSINESS.  General
                  (212) 409-2000.
 1




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Available
    Information
  Form 10-K, Form 10-Q, Form 8-K, www.ladenburg.com Form 10-K.
  Caution
    Concerning Forward-Looking Statements and Risk Factors
  Form 10-K and/or
  Recent
    Developments
  Amendment
    of Clearing Arrangements and Forgivable Loan
       2




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##### Table of Contents



Acquisition
    Strategy
  and/or
  Business
    Segments
    Ladenburg
    Investment
    Banking Activities
    Corporate
    Finance
  at-the-market
 3




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Strategic
    and Financial Advisory Services
      Sales and
    Trading
           4




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Research
    Services
      
    reviews and analyzes general market conditions and other
    industry groups;
    issues written reports on companies, with recommendations on
    specific actions to buy, sell or hold;
    furnishes information to retail and institutional
    customers; and
    responds to inquires from customers and account executives.  Asset
    Management
  Ladenburg
    Thalmann Asset Management
    Ladenburg
    Asset Management Program
    Investment
    Consulting Services
    Private
    Investment Management
    Retirement
    Plan Sponsor Services
   5




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Alternative
    Investments
    Ladenburg
    Architect Program
    Third
    Party Advisory Services
    Investment
    Activities
    Independent
    Brokerage and Advisory Services
  Overview
       6




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##### Table of Contents



Strategy
    for our Independent Brokerage and Advisory Services
    Business
    
    Recruit experienced financial
    professionals.  Each of Investacorp and Triad
    actively recruits experienced financial professionals. These
    efforts are supported by advertising, targeted direct mail and
    inbound and outbound telemarketing. Although Investacorp and
    Triad will continue to attempt to recruit those financial
    advisors who sell primarily mutual funds, annuities and
    insurance, it also intends to pursue financial advisors who
    focus on the sale of equities, fixed income and alternative
    investment products.
    Provide technological solutions to home-office employees and
    independent financial advisors.  We believe that
    it is imperative that Investacorp and Triad continue to possess
    state-of-the-art
    technology so that their employees and independent financial
    advisors can effectively transact, facilitate, measure and
    record business activity in a timely, accurate and efficient
    manner. By continuing our commitment to provide a highly capable
    technology platform to process business, we believe that
    Investacorp and Triad can achieve economies of scale and
    potentially reduce the need to hire additional personnel.
    Build recurring revenue.  We have recognized
    the trend toward increased investment advisory business and each
    of Investacorp and Triad is focused on building its fee based
    investment advisory business, which may be better suited for
    certain clients. While these fees generate substantially lower
    first year revenue than 7




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most commission products, the recurring nature of these fees
    provides a platform for accelerating future revenue growth.  
    Assist financial advisors to increase their
    sales.  Investacorp and Triad are aligned with
    their financial advisors in seeking to increase their sales and
    improve productivity. Investacorp and Triad undertake
    initiatives to assist their financial advisors with client
    recruitment, training, compliance and product support.
    Investacorp and Triad also focus on improving back-office
    support to allow financial advisors more time to focus on
    serving their clients, rather than administrative burdens.
    Acquire other independent brokerage firms.  We
    may also pursue the acquisition of other independent brokerage
    firms. The ability to realize growth through acquisitions,
    however, will depend on the availability of suitable
    broker-dealer candidates and our ability to successfully
    negotiate favorable terms. There can be no assurance that we
    will be able to consummate any such acquisitions. Further, there
    are costs associated with the integration of new businesses and
    personnel, which may be more than anticipated.  Investacorp
    Triad
    Investacorps
    and Triads Brokerage Business
      Investacorps
    Asset Management Business
  Advisor
    Managed Accounts
    
    Architect  a complete wrap-fee account
    with a $50,000 minimum; no transaction costs for mutual fund,
    equity, fixed income or ETF trades.
    Structure  a fee-based account with a $25,000
    minimum; allowing transactions in mutual funds, equities, fixed
    income or ETFs with transaction costs.
    Choice  a fee-based account with a $25,000 minimum;
    allowing transactions in mutual funds and ETFs with transaction
    costs. 8




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
    Edge  a lower cost alternative fee-based account with
    a $25,000 minimum; allowing transactions in non-transaction fee
    mutual funds with no transaction costs.
    Managed Account Solutions  a fee-based account
    allowing transactions in mutual funds, equities, fixed income
    and ETFs with transaction costs which leverages NFS direct
    technology.    Third
    Party Programs
    Triads
    Asset Management Business
  Advisor
    Managed Accounts
    
    Summit  a mutual fund wrap account with a
    $50,000 minimum; no transaction costs for mutual fund
    transactions.
    Pinnacle  a complete wrap account with a
    $150,000 minimum; no transaction costs for mutual fund, equity,
    ETF or fixed income trades.
    Apex  no account minimum; discounted transaction
    costs.
    Crown  no account minimum; $20 annual fee; discounted
    transaction costs.  Third
    Party Managed Accounts
    
    Privately managed accounts  provides a broad
    selection of managers from which to select, together with
    consultation with Triad regarding appropriate options.
    Odyssey  designed for
    mid-net-worth
    accounts; provides a diversified, fee-based asset management
    solution with portfolio analytics.
    Managed Account Solutions  provides a turn-key asset
    management platform offering fee-based asset management through
    separate managed accounts, multi-managed accounts and mutual
    fund model portfolios; includes analytics and performance and
    position-specific reporting.  Investalink
  ® ®
 9




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® ®
  Administration,
    Operations, Securities Transactions Processing and Customer
    Accounts
    Seasonality
    and Cyclical Factors
    Competition
       10




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Government
    Regulation
        
    sales methods and supervision;
    trading practices among broker-dealers;
    use and safekeeping of customers funds and securities;
    capital structure of securities firms;
    record keeping;
    conduct of directors, officers and employees; and
    advertising, including regulations related to telephone
    solicitation.    
    limitations on the ability of investment advisors to charge
    performance-based or non-refundable fees to clients;
    record-keeping and reporting requirements;
    disclosure requirements;
    limitations on principal transactions between an advisor or its
    affiliates and advisory clients; and
    general anti-fraud prohibitions.    Net
    Capital Requirements
   11




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Rule 15c3-1 Rule 15c3-3
  Rule 15c3-1,
  Rule 15c3-1.
        Geographic
    Area
    Personnel
   12




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##### Table of Contents



ITEM 1A.
    RISK
    FACTORS.    Risk
    Factors Relating to Our Business
  Changing
    conditions in financial markets and the economy could result in
    decreased revenues, losses or other adverse
    consequences.
    
    a market downturn could lead to a decline in the volume of
    transactions executed for customers and, therefore, to a decline
    in the revenues we receive from commissions and spreads;
    unfavorable financial or economic conditions could reduce the
    number and size of transactions in which we provide
    underwriting, financial advisory and other services. Our
    investment banking revenues, in the form of financial advisory
    and underwriting or placement fees, are directly related to the
    number and size of the transactions in which we participate and
    could therefore be adversely affected by unfavorable financial
    or economic conditions;
    adverse changes in the market could lead to losses from
    principal transactions. To the extent that we own assets, i.e.,
    have long positions, a downturn in the market could result in
    losses from a decline in the value of those long positions.
    Conversely, to the extent that we have sold assets that we do
    not own, i.e., have short positions, an upturn in the market
    could expose us to potentially unlimited losses as we attempt to
    cover our short positions by acquiring assets in a rising market;
    adverse changes in the market could also lead to a reduction in
    revenues from asset management fees. Even in the absence of a
    market downturn, below-market investment performance by
    portfolio managers could reduce asset management revenues and
    assets under management and result in reputational damage that
    might make it more difficult to attract new investors;
    increases in credit spreads, as well as limitations on the
    availability of credit, such as occurred during 2008, can affect
    our ability to borrow on a secured or unsecured basis, which may
    adversely affect our liquidity and results of operations;
    new or increased taxes on compensation payments such as bonuses
    or securities transactions may adversely affect our financial
    results; and
    low market interest rates adversely impact interest sharing
    revenues received from our clearing firm.  We have
    incurred, and may continue to incur, significant operating
    losses.
   13




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A large
    portion of our revenue for any period may result from a limited
    number of underwriting transactions.
    Our
    quarterly operating results may fluctuate substantially due to
    the nature of our business and therefore we may fail to meet
    profitability expectations.
    Our
    financial leverage impairs our ability to obtain financing and
    limits cash flow available for operations.
    
    limits our ability to obtain additional financing for working
    capital, regulatory capital requirements, acquisitions or
    general corporate purposes;
    requires us to dedicate a substantial portion of cash flows from
    operations to the payment of debt service on our indebtedness,
    resulting in less cash available for operations and other
    purposes; and
    increases our vulnerability to downturns in our business or in
    general economic conditions.    Our
    business depends on commissions and fees generated from the
    distribution of financial products , and adverse changes in the
    structure or amount of fees paid by the sponsors of these
    products could materially adversely affect our cash flows,
    revenues and results of operations.
    Rule 12b-1 Rule 12b-1
  Misconduct
    by our employees and independent financial advisors is difficult
    to detect and deter and could harm our business, results of
    operations or financial condition.
  and/or
 14




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
    binding us to transactions that exceed authorized limits;
    hiding unauthorized or unsuccessful activities resulting in
    unknown and unmanaged risks or losses;
    improperly using or disclosing confidential information;
    recommending transactions that are not suitable or in the
    clients best interests;
    engaging in fraudulent or otherwise improper activity;
    engaging in unauthorized or excessive trading to the detriment
    of customers; or
    otherwise not complying with laws or our control procedures.    We may be
    prohibited from underwriting securities due to capital
    limits.
    Our
    capital markets and strategic advisory engagements are singular
    in nature and do not generally provide for subsequent
    engagements.
  engagement-by-engagement
  We depend
    on our senior employees and the loss of their services could
    harm our business.
    We face
    significant competition for professional employees.
   15




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Poor
    performance of the investment products and services recommended
    or sold to asset management clients may have a material adverse
    effect on our business.
    Systems
    failures could significantly disrupt our business.
    back-up
  A
    relatively small number of institutional customers generate a
    significant portion of our institutional trading
    revenue.
    Our
    expenses may increase due to real estate commitments.
  sub-tenants
  Our risk
    management policies and procedures may leave us exposed to
    unidentified risks or an unanticipated level of risk.
  up-to-date
 16




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We rely
    on one clearing broker and the termination of the clearing
    agreements could disrupt our business.
    Our
    clearing broker extends credit to our clients and we are liable
    if the clients do not pay.
    Risk
    Factors Relating to Our Industry
  Credit
    risk exposes us to losses caused by third parties
    financial or other problems.
    
    trading counterparties;
    customers;
    clearing agents;
    other broker-dealers;
    exchanges;
    clearing houses; and
    other financial intermediaries as well as issuers whose
    securities we hold. 17




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
    holding securities of third parties;
    executing securities trades that fail to settle at the required
    time due to non-delivery by the counterparty or systems failure
    by clearing agents, exchanges, clearing houses or other
    financial intermediaries; and
    extending credit to clients through bridge or margin loans or
    other arrangements.    Intense
    competition from existing and new entities may adversely affect
    our revenues and results of operations.
    Errors
    and omissions claims may negatively affect our business and
    results of operations.
    We are
    subject to various risks associated with the securities
    industry.
    
    the volatility of domestic and international financial, bond and
    stock markets;
    extensive governmental regulation;
    litigation;
    intense competition;
    substantial fluctuations in the volume and price level of
    securities; and
    dependence on the solvency of various third parties.   18




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Legal
    liability may harm our business.
      Risk
    Factors Relating to the Regulatory Environment
  We are
    subject to extensive securities regulation and the failure to
    comply with these regulations could subject us to penalties or
    sanctions.
      
    sales methods and supervision;
    trading practices among broker-dealers;
    use and safekeeping of customers funds and securities;
    capital structure of securities firms;
    record keeping; and
    conduct of directors, officers and employees. 19




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
    censure;
    fine;
    civil penalties, including treble damages in the case of insider
    trading violations;
    the issuance of
    cease-and-desist
    orders;
    the deregistration or suspension of our broker-dealer activities;
    the suspension or disqualification of our officers or
    employees; or
    other adverse consequences.    Legislative,
    judicial or regulatory changes to the classification of
    independent contractors could increase our operating
    expenses.
    Failure
    to comply with net capital requirements could subject us to
    suspension or revocation by the SEC or suspension or expulsion
    by FINRA.
   20




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A change
    in the tax treatment of insurance products or a determination
    that these products are not insurance contracts for federal tax
    purposes could reduce the demand for these products, which may
    reduce our revenue.
    Risk
    Factors Relating to Strategic Acquisitions and the Integration
    of Acquired Operations
  We may be
    unable to successfully integrate acquired businesses into our
    existing business and operations.
  and/or
  We may be
    adversely affected if the firms we acquire do not perform as
    expected.
  and/or and/or
  We face
    numerous risks and uncertainties as we expand our
    business.
   21




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Risk
    Factors Relating to Owning Our Stock
  The price
    of our common stock may fluctuate significantly, and this may
    make it difficult for you to resell the shares of our common
    stock at prices you find attractive.
      
    variations in quarterly operating results;
    general economic and business conditions, including conditions
    in the securities brokerage and investment banking markets;
    our announcements of significant contracts, milestones or
    acquisitions;
    our relationships with other companies;
    our ability to obtain needed capital commitments;
    additions or departures of key personnel;
    the initiation or outcome of litigation or arbitration
    proceedings;
    sales of common stock, conversion of securities convertible into
    common stock, exercise of options and warrants to purchase
    common stock or termination of stock transfer restrictions;
    changes in financial estimates by securities analysts; and
    fluctuation in stock market price and volume.      Our
    principal shareholders including our directors and officers
    control a large percentage of our shares of common stock and can
    significantly influence our corporate actions.
   22




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Possible
    additional issuances will cause dilution.
    We may
    issue preferred stock with preferential rights that may
    adversely affect your rights.
    We do not
    expect to pay any cash dividends.
    ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS.    ITEM 2.
    PROPERTIES.          ITEM 3.
    LEGAL
    PROCEEDINGS.  Form 10-K
  ITEM 4.
    REMOVED
    AND RESERVED.   23




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES.    2009

2008Period

High

Low

High

LowFirst Quarter

$
.98


$
.36


$
2.45


$
1.60Second Quarter


.89



.45



2.03



1.51Third Quarter


.85



.45



2.59



1.22Fourth Quarter


.82



.57



1.88



0.65   Holders
    Dividends
    ITEM 6.
    SELECTED
    FINANCIAL DATA.  Form 10-K:
  Year Ended December 31,2009

2008

2007

2006

2005(In thousands, except share and per share amounts)Operating Results:Total revenues

$
150,675


$
120,970
(a)

$
95,826
(b)

$
46,858


$
30,690Total expenses


168,279



140,214



85,922



42,010



56,607(Loss) income before income taxes


(17,604
)


(19,244
)


9,904
(c)


4,848
(d)


(25,917
)(c)Net (loss) income


(18,673
)


(20,263
)


9,391
(c)


4,659
(d)


(25,971
)(c)Per common and equivalent share:Basic and diluted:(Loss) income per common share

$
(0.11
)

$
(0.12
)

$
0.06


$
0.03


$
(0.24
)Basic weighted average common shares


168,623,375



165,812,495



157,355,540



148,693,521



108,948,623Diluted weighted average common shares


168,623,375



165,812,495



168,484,469



153,087,961



108,948,623Balance Sheet Data:Total assets

$
94,637


$
101,668


$
114,132


$
47,343


$
39,299Total liabilities


56,843



50,378



60,029



19,009



26,332Shareholders equity


37,794



51,290



54,103



28,334



12,967Other Data:Book value per share

$
0.22


$
0.30


$
0.33


$
0.18


$
0.09     (a)
    
    Includes $21,190 of revenue from Triad (acquired August 13,
    2008).(b)
    
    Includes $12,191 of revenue from Investacorp (acquired
    October 19, 2007).(c)
    
    Includes losses on extinguishment of debt of $1,833 in 2007 and
    $19,359 in 2005.(d)
    
    Includes $4,983 net gain on sale of Ladenburgs NYSE
    and CBOE memberships. 24




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ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS. (Dollars in thousands, except share and per share
    amounts)  Overview
      Acquisition Strategy
  and/or
  Recent
    Developments
  Amendment
    of Clearing Arrangements and Forgivable Loan
         25




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Critical
    Accounting Policies
  General.
  Clearing Arrangements.
  Customer Claims, Litigation and Regulatory
    Matters.
  Fair Value.
       26




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Valuation of Deferred Tax Assets.
  Stock-Based Compensation.
  Intangible Assets.
  Goodwill.
  Results
    of Operations
   27




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Year Ended December 31,2009


2008


2007Total revenues

$
150,675


$
120,970
(1)

$
95,826
(2)Total expenses


168,279



140,214



85,922
(3)Pre-tax (loss) income


(17,604
)


(19,244
)


9,904
(3)Net (loss) income


(18,673
)


(20,263
)


9,391
(3)EBITDA, as adjusted

$
(2,258
)

$
(5,891
)

$
22,005Add:Interest income


70



219



221Sale of exchange memberships






519



Less:Interest expense


(3,977
)


(4,534
)


(2,304
)Income tax expense


(1,069
)


(1,019
)


(513
)Depreciation and amortization


(3,734
)


(3,292
)


(1,491
)Non-cash compensation


(7,534
)


(6,265
)


(6,694
)Clearing conversion expense


(171
)






Loss on extinguishment of debt










(1,833
)Net (loss) income

$
(18,673
)

$
(20,263
)

$
9,391     (1)
    
    Includes $21,190 of revenue from Triad (acquired August 13,
    2008).(2)
    
    Includes $12,191 of revenue from Investacorp (acquired
    October 19, 2007).(3)
    
    Includes loss on extinguishment of debt of $1,833 in 2007.        28




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Year Ended December 31,2009


2008


2007Revenues:Ladenburg

$
38,671


$
41,997


$
83,313Independent Brokerage and Advisory Services(1)


111,931



79,190



12,191Corporate


73



(217
)


322Total revenues

$
150,675


$
120,970


$
95,826Pre-tax (loss) income:Ladenburg

$
(8,006
)

$
(8,140
)

$
18,435Independent Brokerage and Advisory Services(1)


802



203



411Corporate(2)


(10,400
)


(11,307
)


(8,942
)Total pre-tax (loss) income

$
(17,604
)

$
(19,244
)

$
9,904     (1)
    
    Includes Investacorp since its October 19, 2007 acquisition
    and Triad since its August 13, 2008 acquisition.(2)
    
    Includes interest, compensation, professional fees and other
    general and administrative expenses.  Year
    ended December 31, 2009 compared to year ended
    December 31, 2008
           29




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30




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Year
    ended December 31, 2008 compared to year ended
    December 31, 2007
               31




---



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32




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Liquidity
    and Capital Resources
               33




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Off-Balance
    Sheet Arrangements
    Form 10-K.
  Contractual
    Obligations
    Payments Due By PeriodLess than








AfterContractual Obligations

Total


1 year


1-3 years


4-5 years


5 yearsNote payable to former Investacorp principal shareholder(1)

$
4,436


$
4,436


$



$



$
Note payable to former Triad shareholders(2)


3,037



1,735



1,302







Revolving credit agreement with affiliate of our principal
    shareholder(3)


32,114



1,684



4,059



4,059



22,312Notes payable to clearing firm under forgivable loan(4)


12,100



1,954



3,682



3,382



3,082Operating leases(5)


32,865



6,849



12,636



11,205



2,175Total

$
84,552


$
16,658


$
21,679


$
18,646


$
27,569  34




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##### Table of Contents



(1)
    
    Note bears interest at 4.11% per annum and is payable in 36
    equal monthly installments. See Note 10 to our consolidated
    financial statements.(2)
    
    Note bears interest at 2.51% per annum and is payable in 12
    equal quarterly installments. See Note 10 to our
    consolidated financial statements.(3)
    
    Revolving credit agreement has an August 25, 2016 maturity
    date and bears interest at a rate of 11% per annum, payable
    quarterly. Assumes no payments of principal prior to maturity.
    See Note 10 to our consolidated financial statements.(4)
    
    Note bears interest at 5.25% per annum and is payable in 7
    annual installments. See Note 10 to our consolidated
    financial statements.(5)
    
    Excludes sublease revenues of $25,918. See Note 11 to our
    consolidated financial statements.  sub-tenants
  Market
    Risk
      Special
    Note Regarding Forward-Looking Statements
      ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.   35




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA.  page F-1
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE.    ITEM 9A(T).  CONTROLS
    AND PROCEDURES.  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15)e) 15d-15(e)
    Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f).
        Form 10-K,
   36




---



##### Table of Contents



Changes
    in Internal Control Over Financial Reporting
    ITEM 9B.
    OTHER
    INFORMATION.    PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.    ITEM 11.
    EXECUTIVE
    COMPENSATION.    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS.    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE.    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES.    PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES.    page F-1
     37




---



##### Table of Contents



Form 10-K.
  EXHIBIT INDEX
  IncorporatedBy Referencefrom

No. inExhibit No.

Description

Document

Document3
.1

Articles of Incorporation

A

3.13
.2

Articles of Amendment to the Articles of Incorporation, dated
    August 24, 1999

B

3.23
.3

Articles of Amendment to the Articles of Incorporation, dated
    April 3, 2006

C

3.13
.4

Amended and Restated Bylaws

D

3.24
.1

Form of common stock certificate

A

4.14
.2

Credit Agreement, dated as of October 19, 2007, by and
    between the Company and Frost Gamma Investments Trust, including
    the form of note thereto

E

4.14
.3

Amendment No. 1 to Credit Agreement by and between the
    Company and Frost Nevada Investments Trust, as assignee, dated
    as of August 25, 2009

V

4.24
.4

Forgivable Loan Agreement, dated as of August 25, 2009,
    between the Company and National Financial Services LLC. Certain
    Portions of this agreement have been omitted under a request for
    confidential treatment pursuant to
    Rule 24b-2
    of the Securities Exchange Act of 1934 and filed separately with
    the United States Securities and Exchange Commission.

V

4.14
.5

Non-Negotiable Promissory Note, dated as of October 19,
    2007, made by the Company in favor of Bruce A. Zwigard

E

4.24
.6

Pledge Agreement, dated as of October 19, 2007, by and
    between the Company and Bruce A. Zwigard

E

4.34
.7

Non-Negotiable Promissory Note, dated as of August 13,
    2008, made by Ladenburg Thalmann Financial Services Inc. in
    favor of Mark C. Mettelman and Robert W. Bruderman as
    representatives of the shareholders of Triad Advisors, Inc.

U

4.14
.8

Pledge Agreement, dated as of August 13, 2008, by and
    between Ladenburg Thalmann Financial Services Inc. and Mark C.
    Mettelman and Robert W. Bruderman as representatives of the
    shareholders of Triad Advisors, Inc.

U

4.210
.1

Amended and Restated 1999 Performance Equity Plan*

F

4.110
.2

2009 Incentive Compensation Plan.*

W

Exhibit A10
.3

Form of Stock Option Agreement, dated as of May 7, 2001,
    between the Company and certain directors*

G

10.310
.4

Schedule of Stock Option Agreements in the form of
    Exhibit 10.3, including material detail in which such
    documents differ from Exhibit 10.3*

G

10.3.110
.5

Stock Option Agreement, dated as of January 10, 2002,
    between the Company and Richard J. Lampen*

H

10.210
.6

Form of Stock Option Agreement, dated January 10, 2002,
    between the Company and each of Richard J. Rosenstock and Mark
    Zeitchick*

H

10.310
.7

Schedule of Stock Option Agreements in the form of
    Exhibit 10.6, including material detail in which such
    documents differ from Exhibit 10.6*

H

10.3.110
.8

Ladenburg Thalmann Financial Services Inc. Qualified Employee
    Stock Purchase Plan*

I

Exhibit A10
.9

Form of Stock Option Agreement, dated November 15, 2002,
    between the Company and each of Bennett S. LeBow, Howard M.
    Lorber, Henry C. Beinstein, Robert J. Eide and Richard J. Lampen*

J

10.4810
.10

Schedule of Stock Option Agreements in the form of
    Exhibit 10.9, including material detail in which such
    documents differ from Exhibit 10.9*

J

10.48.110
.11

Form of Stock Option Agreement, dated September 17, 2003,
    between the Company and each of Howard M. Lorber, Henry C.
    Beinstein and Richard J. Lampen*

K

10.110
.12

Schedule of Stock Option Agreements in the form of
    Exhibit 10.11, including material detail in which such
    documents differ from Exhibit 10.11*

K

10.1.110
.13

Office Lease dated March 30, 2007 between the Company and
    Frost Real Estate Holdings, LLC

L

10.110
.14

Stock Option Agreement, dated July 13, 2006, issued to
    Dr. Phillip Frost*

M

10.210
.15

Warrant issued to BroadWall Capital LLC

N

10.1 38




---



##### Table of Contents



IncorporatedBy Referencefrom

No. inExhibit No.

Description

Document

Document10
.16

Form of Stock Option Agreement issued to employees of BroadWall

N

10.210
.17

Letter Agreement, dated September 14, 2006, between
    Ladenburg Thalmann Financial Services Inc. and Vector Group Ltd.
    (Vector Agreement)

O

10.110
.18

First Amendment to Vector Agreement dated as of
    December 20, 2007

P

10.110
.19

Form of Warrant issued to the stockholders of Telluride
    Holdings, Inc.

Q

10.210
.20

Amendment to Employment Agreement between Ladenburg Thalmann
    Financial Services Inc., Ladenburg Thalmann & Co. Inc.
    and Mark Zeitchick.*

R

10.310
.21

Stock Purchase Agreement, dated as of October 19, 2007, by
    and among Ladenburg Thalmann Financial Services Inc., the
    Investacorp Companies, the VIA Companies, Bruce A. Zwigard and
    the Bruce A. Zwigard Grantor Retained Annuity Trust dated
    June 20, 2007

E

10.110
.22

Non-Plan Option Agreement, dated as of October 19, 2007, by
    and between Ladenburg Thalmann Financial Services Inc. and Bruce
    A. Zwigard

E

10.210
.23

Warrant, dated as of October 19, 2007, issued to Frost
    Gamma Investments Trust pursuant to Credit Agreement

E

10.310
.24

Employment Letter dated as of February 8, 2008 between
    Ladenburg Thalmann Financial Services Inc. and Brett Kaufman*

S

10.110
.25

Agreement and Plan of Merger dated as of July 9, 2008 by
    and among Ladenburg Thalmann Financial Services Inc., Triple
    Acquisition Inc., Triad Advisors, Inc. and the shareholders of
    Triad Advisors, Inc.

T

2.121


List of Subsidiaries

**

23
.1

Consent of Eisner LLP

**

24


Power of Attorney

***

31
.1

Certification of Chief Executive Officer, Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002

**

31
.2

Certification of Chief Financial Officer, Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002

**

32
.1

Certification of Chief Executive Officer, Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002

**

32
.2

Certification of Chief Financial Officer, Pursuant to
    18 U.S.C. Section 1350, as Adopted Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002

**

     *
    
    Management Compensation Contract**
    
    Filed herewith***
    
    Contained on the signature page heretoA.
    
    Registration statement on
    Form SB-2
    (File
    No. 333-31001).B.
    
    Annual report on
    Form 10-K
    for the year ended August 24, 1999.C.
    
    Quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2006.D.
    
    Current report on
    Form 8-K,
    dated September 20, 2007 and filed with the SEC on
    September 21, 2007.E.
    
    Current report on
    Form 8-K,
    dated October 19, 2007 and filed with the SEC on
    October 22, 2007.F.
    
    Registration statement on
    Form S-8
    (File
    No. 333-139254).G.
    
    Quarterly report on
    Form 10-Q
    for the quarter ended June 30, 2001.H.
    
    Registration statement on
    Form S-3
    (File
    No. 333-81964).I.
    
    Definitive proxy statement filed with the SEC on October 3,
    2002 relating to the annual meeting of shareholders held on
    November 6, 2002.J.
    
    Annual report on
    Form 10-K
    for the year ended December 31, 2002.K.
    
    Quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2003.L.
    
    Current report on
    Form 8-K,
    dated March 30, 2007 and filed with the SEC on
    April 2, 2007.M.
    
    Current report on
    Form 8-K,
    dated July 10, 2006 and filed with the SEC on
    August 3, 2006. 39




---



##### Table of Contents



N.
    
    Current report on
    Form 8-K,
    dated September 11, 2006 and filed with the SEC on
    September 12, 2006.O.
    
    Current report on
    Form 8-K,
    dated September 21, 2006 and filed with the SEC on
    September 27, 2006.P.
    
    Current report on
    Form 8-K,
    dated December 20, 2007 and filed with the SEC on
    December 20, 2007.Q.
    
    Current report on
    Form 8-K,
    dated September 6, 2006 and filed with the SEC on
    September 7, 2006.R.
    
    Current report on
    Form 8-K/A
    dated September 6, 2006 and filed with the SEC on
    October 24, 2006.S.
    
    Current report on
    Form 8-K,
    dated March 27, 2008 and filed with the SEC on
    March 28, 2008.T.
    
    Current report on
    Form 8-K,
    dated July 9, 2008 and filed with the SEC on July 10,
    2008.U.
    
    Current report on
    Form 8-K,
    dated August 13, 2008 and filed with the SEC on
    August 14, 2008.V.
    
    Quarterly report on
    Form 10-Q
    for the quarter ended September 30, 2009.W.
    
    Definitive proxy statement filed with the SEC on July 20,
    2009 relating to the annual meeting of shareholders held on
    August 27, 2009. 40




---



##### Table of Contents



SIGNATURES    
     By:
    /s/  Brett
    H. Kaufman   Title:
    Vice President and Chief Financial Officer  POWER OF
    ATTORNEY
  Form 10-K
    Signatures

Title/s/  Richard
    J. LampenRichard
    J. Lampen

President and Chief Executive Officer 
    (Principal Executive Officer)/s/  Brett
    H. KaufmanBrett
    H. Kaufman

Vice President and Chief Financial Officer 
    (Principal Financial Officer and Principal 
    Accounting Officer)/s/  Henry
    C. BeinsteinHenry
    C. Beinstein

Director/s/  Robert
    J. EideRobert
    J. Eide

Director/s/  Phillip
    Frost, M.D.Phillip
    Frost, M.D.

Director/s/  Brian
    S. GensonBrian
    S. Genson

Director/s/  Saul
    GilinskiSaul
    Gilinski

Director/s/  Dr. Richard
    M. KrasnoDr. Richard
    M. Krasno

Director/s/  Howard
    M. LorberHoward
    M. Lorber

Director/s/  Jeffrey
    S. PodellJeffrey
    S. Podell

Director/s/  Richard
    J. RosenstockRichard
    J. Rosenstock

Director/s/  Mark
    ZeitchickMark
    Zeitchick

Director  41




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##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.FORM 10-K
    FOR THE YEAR ENDED DECEMBER 31, 2009
    ITEMS 8 and 15(a) (1) AND (2)
    INDEX TO FINANCIAL STATEMENTS
    FINANCIAL
    STATEMENTS:
  PageLadenburg Thalmann Financial Services Inc. Consolidated
    Financial Statements:Report of Independent Registered Public
    Accounting Firm


F-2Consolidated Statements of Financial Condition as
    of December 31, 2009 and 2008


F-3Consolidated Statements of Operations for the
    years ended December 31, 2009, 2008 and 2007


F-4Consolidated Statements of Changes in
    Shareholders Equity for the years ended December 31,
    2009, 2008 and 2007


F-5Consolidated Statements of Cash Flows for the
    years ended December 31, 2009, 2008 and 2007


F-6Notes to the Consolidated Financial Statements


F-8  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM              F-2




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.CONSOLIDATED STATEMENTS OF
    FINANCIAL CONDITION
    (Dollars in thousands, except share and per share
    amounts)
  December 31,2009


2008ASSETSCash and cash equivalents

$
5,702


$
6,621Securities owned, at fair value


2,209



4,828Receivables from clearing brokers


13,406



14,558Receivables from other broker-dealers


329



Other receivables, net


6,203



4,423Furniture, equipment and leasehold improvements, net


3,154



3,714Restricted assets


350



701Intangible assets, net


28,509



31,625Goodwill


29,739



29,739Unamortized debt issue cost


1,879



2,400Other assets


3,157



3,059Total assets

$
94,637


$
101,668LIABILITIES AND SHAREHOLDERS EQUITYSecurities sold, but not yet purchased, at fair value

$
9


$
91Accrued compensation


4,299



3,661Commissions and fees payable


5,957



5,203Accounts payable and accrued liabilities


5,671



5,653Deferred rent


3,378



3,863Deferred income taxes


1,726



780Accrued interest


365



193Notes payable


35,438



30,934Total liabilities


56,843



50,378Commitments and contingencies (Notes 3 and 11)Shareholders equity:Preferred stock, $.0001 par value; 2,000,000 shares
    authorized; none issued






Common stock, $.0001 par value; 400,000,000 shares
    authorized; shares issued and outstanding, 167,907,038 in 2009
    and 171,715,514 in 2008


17



17Additional paid-in capital


171,349



166,172Accumulated deficit


(133,572
)


(114,899
)Total shareholders equity


37,794



51,290Total liabilities and shareholders equity

$
94,637


$
101,668    F-3




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.CONSOLIDATED STATEMENTS OF
    OPERATIONS(Dollars in thousands, except share and per
    share amounts)
  Year Ended December 31,2009


2008


2007Revenues:Commissions and fees

$
123,821


$
97,277


$
31,958Investment banking


15,155



14,714



55,401Asset management


2,002



2,721



3,028Principal transactions


846



(2,736
)


251Interest and dividends


2,372



4,299



2,970Other income


6,479



4,695



2,218Total revenues


150,675



120,970



95,826Expenses:Commissions and fees


87,165



60,790



9,012Compensation and benefits


40,232



42,644



48,918Non-cash compensation


7,534



6,265



6,694Brokerage, communication and clearance fees


6,836



6,010



3,976Rent and occupancy, net of sublease revenue


3,476



3,222



1,307Professional services


5,725



5,976



3,944Interest


3,977



4,534



2,304Depreciation and amortization


3,734



3,292



1,491Loss on extinguishment of debt










1,833Other


9,600



7,481



6,443Total expenses


168,279



140,214



85,922(Loss) income before income taxes


(17,604
)


(19,244
)


9,904Income tax expense


1,069



1,019



513Net (loss) income

$
(18,673
)

$
(20,263
)

$
9,391Net (loss) income per common share (basic and diluted)

$
(0.11
)

$
(0.12
)

$
0.06Weighted average common shares used in computation of per share
    data:Basic


168,623,375



165,812,495



157,355,540Diluted


168,623,375



165,812,495



168,484,469    F-4




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.CONSOLIDATED STATEMENT OF
    CHANGES
    IN SHAREHOLDERS EQUITY
    (Dollars in thousands, except share amounts)
  AdditionalCommon Stock


Paid-in


AccumulatedShares


Amount


Capital


Deficit


TotalBalance, December 31, 2006


155,972,805


$
15


$
132,346


$
(104,027
)

$
28,334Issuance of common stock under employee stock purchase plan


183,308







407







407Exercise of stock options, net of 400,702 shares tendered
    in payment of exercise price and 355,355 options used in
    cashless exercise


3,618,420



1



977







978Shares acquired from an employee in satisfaction of withholding
    taxes on exercise of options


(521,711
)






(1,122
)






(1,122
)Stock options granted to members of former Advisory Board and
    consultants










437







437Stock-based compensation to employees










6,257







6,257Stock retired under stock repurchase plan


(332,529
)






(612
)






(612
)Issuance of common stock in exchange for promissory notes
    payable to former parent


2,777,778







6,833







6,833Warrant issued in connection with credit agreement










3,200







3,200Net income














9,391



9,391Balance, December 31, 2007


161,698,071



16



148,723



(94,636
)


54,103Issuance of common stock under employee stock purchase plan


196,305







285







285Exercise of stock options, net of 128,657 shares tendered
    in payment of exercise price and 255,183 options used in
    cashless exercise


2,018,029







527







527Stock options granted to members of former Advisory Board and
    consultants










267







267Stock-based compensation to employees


143,617







5,998







5,998Stock retired under stock repurchase plan


(583,895
)






(1,060
)






(1,060
)Common stock issued in Punk Ziegel acquisition


250,000







435







435Common stock issued in Triad acquisition


7,993,387



1



10,426







10,427Warrants issued for acquisition of customer accounts










571







571Net loss














(20,263
)


(20,263
)Balance, December 31, 2008


171,715,514



17



166,172



(114,899
)


51,290Issuance of common stock under employee stock purchase plan


210,048







118







118Exercise of stock options


512,875







242







242Stock options granted to members of former Advisory Board and
    consultants










550







550Stock-based compensation to employees


1







6,984







6,984Repurchase and retirement of common stock


(4,531,400
)






(2,717
)






(2,717
)Net loss














(18,673
)


(18,673
)Balance, December 31, 2009


167,907,038


$
17


$
171,349


$
(133,572
)

$
37,794    F-5




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.CONSOLIDATED STATEMENTS OF CASH
    FLOWS(Dollars in thousands)
  Year Ended December 31,2009


2008


2007Cash flows from operating activities:Net (loss) income

$
(18,673
)

$
(20,263
)

$
9,391Adjustments to reconcile net (loss) income to net cash (used in)
    provided by operating activities:Depreciation and amortization


618



538



387Write-off of furniture, fixtures and leasehold improvements, net










115Adjustment to deferred rent


(76
)


(98
)


14Amortization of debt discount


721



845



304Amortization of debt issue cost


521



668



Amortization of intangible assets


3,116



2,754



1,104Deferred income taxes


946



780



Accrued interest


172



192



671Non-cash compensation expense


7,534



6,265



6,694Loss on extinguishment of debt










1,833(Increase) decrease in operating assets, net of effects of
    acquisitions:Securities owned


2,619



(31
)


(2,386
)Receivables from clearing brokers


1,152



24,562



(9,749
)Receivables from other broker-dealers


(329
)


15,511



(9,559
)Other receivables, net


(1,780
)


(2,116
)


(1,569
)Other assets


(166
)


1,311



1,563Increase (decrease) in operating liabilities, net of effects of
    acquisitions:Securities sold, but not yet purchased


(82
)


(865
)


(1,096
)Accrued compensation


638



(3,876
)


2,929Commissions and fees payable


754



(645
)


646Accounts payable and accrued liabilities


18



(1,767
)


(4,152
)Net cash (used in) provided by operating activities


(2,297
)


23,765



(2,860
)Cash flows from investing activities:Acquisition of relationships and customer accounts










(92
)Adjustment to intangible assets






212



Payment for Triad acquisition, net of cash received






(5,843
)


Payment for Punk Ziegel acquisition, net of cash received






(2,461
)


Payment for Investacorp acquisition, net of cash received






(55
)


(25,044
)Purchases of furniture, equipment and leasehold improvements


(399
)


(546
)


(395
)Proceeds from sales of exchange memberships






120



Decrease in restricted assets


351



318



1,135Other






(4
)


3Net cash used in investing activities


(48
)


(8,259
)


(24,393
)Cash flows from financing activities:Issuance of common stock other than private equity offerings


360



812



1,385Shares tendered for withholding taxes on exercise of stock
    options










(1,122
)Repurchases of common stock


(2,717
)


(1,060
)


(612
)Issuance of subordinated notes payable










72,000Repayment of subordinated notes payable










(72,000
)Issuance of other notes payable


10,000







30,000Principal borrowings (payments) under revolving credit facility,
    net


450



(12,000
)


Principal payments on other notes payable


(6,667
)


(5,232
)


(786
)Net cash provided by (used in) financing activities


1,426



(17,480
)


28,865Net (decrease) increase in cash and cash equivalents


(919
)


(1,974
)


1,612Cash and cash equivalents, beginning of period


6,621



8,595



6,983Cash and cash equivalents, end of period

$
5,702


$
6,621


$
8,595 F-6




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS  (Continued)
 (Dollars
    in thousands)
  Year Ended December 31,2009


2008


2007Supplemental cash flow information:Interest paid

$
2,524


$
3,440


$
2,766Taxes paid


60



390



193Non-cash investing and financing transactions:Warrants issued for acquisition of customer accounts





$
571


$
Lease commitment capitalized as part of Capitalink acquisition










463Issuance of shares of common stock in exchange for $5,000 of
    promissory notes payable to former parent










6,833Warrant issued in connection with credit agreement










3,200Leasehold improvements financed by landlord in connection with
    relocation of premises and included in deferred rent






2,500



Acquisition of Investacorp and affiliates:Assets acquired









$
50,849Liabilities assumed ($6,676) and note payable issued to former
    principal shareholder ($13,550)










(20,226
)Cash paid in acquisition










30,623Cash acquired in acquisition










(5,579
)Net cash paid in acquisition









$
25,044Acquisition of Punk Ziegel:Assets acquired





$
4,174



Liabilities assumed






(1,039
)


Net assets acquired






3,135



Stock issued in acquisition






(435
)


Cash paid in acquisition






2,700Cash acquired in acquisition






(239
)


Net cash paid in acquisition





$
2,461



Acquisition of Triad Advisors:Assets acquired





$
23,939



Liabilities assumed






(2,172
)


Net assets acquired






21,767



Note issued in acquisition






(4,384
)


Stock issued in acquisition






(10,427
)


Cash paid in acquisition






6,956



Cash acquired in acquisition






(1,113
)


Net cash paid in acquisition





$
5,843



    F-7




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
    in thousands, except share and per share amounts)
  1.
    Description
    of Business  wholly-owned
          2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
    Use of
    Estimates
    Reclassifications
    Cash
    Equivalents
   F-8




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
  Revenue
    Recognition
            Furniture,
    Equipment and Leasehold Improvements
   F-9




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    Share-Based
    Compensation
    Intangible
    Assets
    Goodwill
    Recently
    Issued Accounting Pronouncements
     F-10




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
        3.
    Acquisitions  Triad
     F-11




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    Cash

$
1,113Receivables from clearing broker


2,074Other receivables


397Intangible assets(a)


13,022Goodwill(b)


5,837Securities owned


500Fixed assets


296Other assets


700Total assets acquired


23,939Commissions and fees payable


1,207Accrued expenses and other liabilities


853Accrued compensation


112Total liabilities assumed


2,172Total purchase price

$
21,767
     (a)
    
    Intangible assets relate principally to relationships with
    financial advisors ($9,786), vendor relationships ($1,731) and
    non-compete covenants ($1,364), have a weighted average useful
    life of 16 years and are expected to be deductible for tax
    purposes over 15 years (see Note 7).(b)
    
    Goodwill is expected to be deductible for tax purposes over a
    15-year
    period (see Note 8).  Punk
    Ziegel
  paid-in-capital,
  Investacorp
     F-12




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
     Cash and cash equivalents

$
5,579Securities owned


478Receivables from clearing brokers


2,984Intangible assets(a)


17,441Goodwill(b)


23,546Other assets


821Total assets acquired


50,849Commissions and fees payable


3,995Accounts payable and accrued liabilities


2,681Total liabilities assumed


6,676Total purchase price

$
44,173
     (a)
    
    Intangible assets relate principally to relationships with
    financial advisors ($14,921), have a weighted average useful
    life of 18 years and are expected to be deductible for tax
    purposes over 15 years (see Note 7).(b)
    
    Goodwill is expected to be deductible for tax purposes over a
    15 year period (see Note 8).    Pro Forma
    Information
    Year Ended December 31,2008

2007Total revenue

$
163,334


$
209,846Net loss

$
(18,709
)

$
(71
)(1)Basic and diluted loss per share

$
(0.11
)

$
(0.00
)Weighted average common shares outstanding  basic and
    diluted


170,726,463



165,348,927     (1)
    
    Includes a non-recurring charge of $9,200 for special bonuses
    paid to Investacorp employees prior to the closing of the
    acquisition.   F-13




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
   4.
    Securities
    Owned and Securities Sold, But Not Yet Purchased    SecuritiesSecurities


Sold, But NotOwned


Yet PurchasedDecember 31, 2009Certificates of deposit

$
100


$
Common stock and warrants


517



Restricted common stock and warrants


1,592



9$
2,209


$
9December 31, 2008Certificates of deposit

$
1,100


$
Common stock and warrants


3,231



91Restricted common stock and warrants


497



$
4,828


$
91
           
    Level 1  inputs are quoted prices (unadjusted)
    in active markets for identical assets or liabilities the
    Company has the ability to access.
    Level 2  inputs are inputs (other than quoted
    prices included within level 1) that are observable
    for the asset or liability, either directly or indirectly.
    Level 3  unobservable inputs for the asset or
    liability and rely on managements own assumptions about
    the assumptions that market participants would use in pricing
    the asset or liability. (The unobservable inputs should be
    developed based on the best information available in the
    circumstances and may include the Companys own data.) F-14




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
     December 31, 2009Securities owned, at fair value

Level 1


Level 2


Level 3


TotalCertificates of deposit

$



$
100


$



$
100Common stock and warrants


517



1,592







2,109Total

$
517


$
1,692


$



$
2,209
   Securities sold, but not yet purchased, at fair value

Level 1


Level 2


Level 3


TotalCommon stock and warrants

$



$
9


$



$
9Total

$



$
9


$



$
9
   December 31, 2008Securities owned, at fair value

Level 1


Level 2


Level 3


TotalCertificates of deposit

$



$
1,100


$



$
1,100Common stock and warrants


3,231



497







3,728Total

$
3,231


$
1,597


$



$
4,828
   Securities sold, but not yet purchased, at fair value

Level 1


Level 2


Level 3


TotalCommon stock and warrants

$
91


$



$



$
91Total

$
91


$



$



$
91
     held-to-maturity, available-for-sale,
  5.
    Net
    Capital Requirements  Rule 15c3-1
  Rule 15c3-1,
 F-15




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    Rule 15c3-3
  6.
    Furniture,
    Equipment and Leasehold Improvements    December 31,2009


2008Cost:Leasehold improvements

$
2,944


$
2,932Computer equipment


2,115



1,640Furniture and fixtures


819



923Other


1,483



1,4697,361



6,964Less: accumulated depreciation and amortization


(4,207
)


(3,250
)Total

$
3,154


$
3,714   7.
    Intangible
    Assets    December 31, 2009


December 31, 2008Estimated


Gross





GrossUseful


Carrying


Accumulated


Carrying


AccumulatedLife (years)


Amount


Amortization


Amount


AmortizationTechnology


1


$
426


$
426


$
426


$
338Relationships with financial advisors


20



24,707



2,320



24,707



1,085Vendor relationships


7



3,613



934



3,613



418Covenants not to compete


5



1,717



531



1,717



188Customer accounts


10



1,311



337



1,311



192Relationships with investment banking clients


4



2,586



2,094



2,586



1,474Leases


6



1,004



261



1,004



104Other


6



67



19



67



7Total





$
35,431


$
6,922


$
35,431


$
3,806  F-16




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##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    2010

$
2,8992011


2,4082012


2,3932013


2,2352014


1,9622015  2027


16,612
   8.
    Goodwill    Independent BrokerageLadenburg


and Advisory Services


Corporate


TotalBalance as of January 1, 2008

$



$
23,546






$
23,546Acquisition of Investacorp






55







55Acquisition of Punk Ziegel


301











301Acquisition of Triad






5,837







5,837Balance as of December 31, 2008 and 2009

$
301


$
29,438


$



$
29,739    F-17




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
   9.
    Income
    Taxes      State andFederal


Local


Total2009:Current

$



$
123


$
123Deferred


781



165



946$
781


$
288


$
1,0692008:Current

$



$
239


$
239Deferred


726



54



780$
726


$
293


$
1,0192007:Current

$
356


$
157


$
513Deferred










$
356


$
157


$
513     2009


2008


2007(Loss) income before income taxes

$
(17,604
)

$
(19,244
)

$
9,904(Benefit) provision under statutory U.S. tax rates


(5,985
)


(6,543
)


3,367Increase (decrease) in taxes resulting from:Nondeductibility of loss on conversion of debt










844Utilization of net operating loss carryforward










(4,366
)Increase in valuation allowance


6,659



6,652



Other nondeductible items


569



369



564State taxes


81



193



104Other, net


(255
)


348



Income tax provision

$
1,069


$
1,019


$
513    F-18




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    2009


2008Deferred tax assets (liabilities):Net operating loss carryforwards

$
28,961


$
25,417
*AMT credit carryforward


250



250Accrued expenses


1,136



1,461Compensation and benefits


7,985



5,238Depreciation and amortization


384



348Other


115



146Unrealized gain


569



252Intangibles


573



202Goodwill


(1,726
)


(780
)38,247



32,534
*Valuation allowance


(39,973
)


(33,314
)*Net deferred taxes

$
(1,726
)

$
(780
)     *
    
    Restated from amounts previously reported.            10.
    Notes
    Payable    December 31,2009


2008Note payable to former Investacorp shareholder, net of $124 and
    $565 of unamortized discount at December 31, 2009 and 2008,
    respectively

$
4,230


$
8,820Note payable to affiliate of principal shareholder of LTS


18,450



18,000Note payable to former Triad shareholders, net of $204 and $484
    of unamortized discount at December 31, 2009 and 2008,
    respectively


2,758



4,114Notes payable to clearing firm under forgivable loan


10,000



Total

$
35,438


$
30,934  F-19




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    Investacorp
    Note
    Frost
    Gamma Credit Agreement
        Triad
    Note
    Notes
    Payable to Former Parent
   F-20




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    Temporary
    Subordinated Loans
    NFS
    Forgivable Loan
      11.
    Commitments
    and Contingencies  Operating
    Leases
   F-21




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    Year Ending

Lease


SubleaseDecember 31,

Commitments


Rentals


Net2010

$
6,849


$
4,801


$
2,0482011


6,713



4,713



2,0002012


5,923



4,756



1,1672013


5,778



4,818



9602014


5,427



4,818



6092015


2,175



2,012



163Total

$
32,865


$
25,918


$
6,947     Litigation
    and Regulatory Matters
       F-22




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
            12.
    Off-Balance-Sheet
    Risk and Concentrations of Credit Risk   F-23




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
        13.
    Shareholders
    Equity  Repurchase
    Program
      Warrants
    Exercise


Number ofExpiration Date

Price


Shares2013

$
.95



500,0002016


.94



1,500,0002016


.96



2,900,0002017


1.91



2,000,0006,900,000   14.
    Earnings
    Per Share   F-24




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    2009


2008


2007Net (loss) income

$
(18,673
)

$
(20,263
)

$
9,391Basic weighted average shares


168,623,375



165,812,495



157,355,540Effect of dilutive securities:Common stock options










8,343,776Warrants to purchase common stock










1,354,148Common stock held in escrow










1,431,005Dilutive potential common shares










11,128,929Weighted average common shares outstanding and dilutive
    potential common shares


168,623,375



165,812,495



168,484,469Net (loss) income per share:Basic and diluted

$
(0.11
)

$
(0.12
)

$
0.06     15.
    Stock
    Compensation Plans  Employee
    Stock Purchase Plan
    Amended
    and Restated 1999 Performance Equity Plan and 2009 Incentive
    Compensation Plan
  and/or
 F-25




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
      Weighted-AverageWeighted-


RemainingAverage


Contractual


AggregateExercise


Term


IntrinsicShares


Price


(Years)


ValueOptions outstanding, December 31, 2006


11,043,311


$
0.99



7.92


$
4,458Granted


4,735,000



2.23Exercised


(1,874,477
)


0.70Forfeited


(820,418
)


1.55Expired






Options outstanding, December 31, 2007


13,083,416



1.44



8.01



10,332Granted


4,068,500



1.75Exercised


(901,867
)


0.58Forfeited


(537,634
)


1.87Expired






Options outstanding, December 31, 2008


15,712,415



1.56



7.69



343Granted


1,105,000



0.83Exercised


(26,875
)


0.58Forfeited


(1,301,000
)


1.48Expired


(372,250
)


3.57Options outstanding, December 31, 2009


15,117,290


$
1.46



6.91


$
200Vested or expected to vest


14,465,863


$
1.45



6.84


$
200Options exercisable, December 31, 2009


9,469,581


$
1.32



6.19


$
200  F-26




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    Weighted-AverageWeighted-


RemainingAverage


Contractual


AggregateExercise


Term


IntrinsicShares


Price


(Years)


ValueGranted


140,000


$
0.79






$
Options outstanding, December 31, 2009


140,000


$
0.79



9.75


$
Vested or expected to vest


77,322


$
0.79



9.75


$
Options exercisable, December 31, 2009





$







$
   Non-Plan
    Options
    Weighted-AverageWeighted-


RemainingAverage


Contractual


AggregateExercise


Term


IntrinsicShares


Price


(Years)


ValueOptions outstanding, December 31, 2006


8,500,000


$
0.63



8.50


$
5,008Granted


3,000,000



1.91Exercised


(2,500,001
)


0.52Forfeited


(1,249,999
)


0.64Options outstanding, December 31, 2007


7,750,000



1.16



8.52



7,434Exercised


(1,500,000
)


0.51Options outstanding, December 31, 2008


6,250,000



1.32



7.83



334Exercised


(486,000
)


0.47Options outstanding, December 31, 2009


5,764,000


$
1.39



6.97


$
112Vested or expected to vest


5,702,768


$
1.39



6.97


$
112Options exercisable, December 31, 2009


4,426,510


$
1.30



6.80


$
112    F-27




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
    Year Ended December 31,2009

2008

2007Dividend yield


0.00
%


0.00
%


0.00
%Expected volatility


96.8
%


99.9
%


127.3
%Risk-free interest rate


2.57
%


3.13
%


4.34
%Expected life (in years)


6.2



6.2



6.2              F-28




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
   16.
    Segment
    Information      IndependentBrokerage and2009

Ladenburg

Advisory Services(1)

Corporate

TotalRevenues

$
38,671


$
111,931


$
73


$
150,675Pre-tax (loss) income


(8,006
)


802



(10,400
)(2)


(17,604
)Identifiable assets


20,940



72,108



1,589



94,637Depreciation and amortization


1,355



2,311



68



3,734Interest


21



19



3,937



3,977Capital expenditures


338



61







399Non-cash compensation


2,270



1,938



3,326



7,5342008Revenues

$
41,997


$
79,190


$
(217
)

$
120,970Pre-tax (loss) income


(8,140
)


203



(11,307
)(2)


(19,244
)Identifiable assets


24,802



73,343



3,523



101,668Depreciation and amortization


1,386



1,809



97



3,292Interest


35



29



4,470



4,534Capital expenditures


453



93







546Non-cash compensation


1,912



2,153



2,200



6,2652007Revenues

$
83,313


$
12,191


$
322


$
95,826Pre-tax income (loss)


18,435



411



(8,942
)(2)


9,904Identifiable assets


61,309



50,644



2,179



114,132Depreciation and amortization


1,109



285



97



1,491Interest


839



1



1,464



2,304Capital expenditures


395











395Non-cash compensation


4,482



534



1,678



6,694     (1)
    
    Includes Investacorp from October 19, 2007 and Triad from
    August 13, 2008(2)
    
    Includes interest, compensation, professional fees and other
    general and administrative expenses. F-29




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
   17.
    Related
    Party Transactions        brother-in-law
    18.
    Quarterly
    Financial Data (Unaudited) Quarters1st


2nd


3rd


4th2009:Revenues

$
33,290
(b)

$
34,326


$
39,246
(b)

$
43,813
(b)Expenses


39,290
(a),(b)


39,165
(a)


43,066
(a),(b)


46,758
(a),(b)Loss before income taxes

$
(6,000
)

$
(4,839
)

$
(3,820
)

$
(2,945
)Net loss

$
(6,241
)

$
(5,158
)

$
(3,728
)

$
(3,546
)Basic and diluted loss per common share

$
(0.04
)

$
(0.03
)

$
(0.02
)

$
(0.02
)Basic and diluted weighted average common shares


171,727,332



167,318,633



167,624,573



167,876,256
     (a)
    
    Includes $1,921, $1,666, $1,685 and $2,262 charge for non-cash
    compensation in the first, second, third and fourth quarters
    2009, respectively.(b)
    
    Includes $3,025 of revenue and $1,037 of expenses in the first
    quarter 2009, $550 of revenue and $216 of expense in the third
    quarter 2009 and $2,364 of revenue and $956 of expense in the
    fourth quarter 2009 resulting from deferred fees from SPAC
    transactions. F-30




---



##### Table of Contents



LADENBURG
    THALMANN FINANCIAL SERVICES INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
 (Dollars
    in thousands, except share and per share amounts)
  Quarters1st


2nd


3rd


4th2008:Revenues

$
28,791
(b)

$
25,232


$
31,272
(b),(c),(d)

$
35,675
(c),(d)Expenses


29,851
(a),(b)


30,376
(a)


36,273
(a),(b)


43,714
(a)Loss before income taxes

$
(1,060
)

$
(5,144
)

$
(5,001
)

$
(8,039
)Net loss

$
(1,033
)

$
(5,233
)

$
(5,691
)

$
(8,306
)Basic and diluted loss per common share

$
(0.01
)

$
(0.03
)

$
(0.03
)

$
(0.05
)Basic and diluted weighted average common shares


161,501,065



162,709,005



167,303,935



171,655,110
     (a)
    
    Includes $1,569, $1,498, $1,538 and $1,660 charge for non-cash
    compensation in the first, second, third and fourth quarters
    2008, respectively.(b)
    
    Includes $2,411 of revenue and $865 of expenses in the first
    quarter 2008, and $2,878 of revenue and $1,196 of expense in the
    third quarter 2008 resulting from deferred fees from SPAC
    transactions.(c)
    
    Includes $5,339 in the third quarter 2008 and $15,851 in the
    fourth quarter 2008 of Triad revenues.(d)
    
    Includes $305 gain on sale of BSE membership the third quarter
    2008 and $214 gain on the sale of AMEX membership in the fourth
    quarter 2008. F-31